DeFi can be confusing as hell particularly for new folk coming into this space and it shouldn’t be exclusionary in any way at all, that is the whole point.
What tends to happen is that users enter DeFi, stumble around a little, get their head around using an AMM-style DEX like Uniswap, Trader Joe, Pancake Swap, Spirit Swap etc.
From there, people start realising that there is a potential to generate the same yield often in one day, which would take a premium savers account at the bank roughly one year to make.
Yield farmers and degens alike make the whole thing possible. When you trade your AVAX for JOE on Trader Joe, there isn’t a traditional order book that aligns buy and sell orders with the help of market makers, which is how Binance, FTX, Kucoin etc. work.
Liquidity providers (LPs) effectively place their crypto in liquidity pools and allow users who want to swap these particular tokens to do so.
If you want to provide ETH and USDT as liquidity in an ETH-USDT LP to these pools then each time a user wants to trade ETH for USDT or USDT for ETH and then they can use yours and others ETH and USDT in the pool to do so.
If you have traded on any DEX you will notice there is a gas fee and a liquidity provider fee.
This liquidity provider fee is distributed to all those that have provided liquidity to the particular pool. This is how users can generate yield on their holdings.
Now, I apologise if that was DeFi 101 but you would be surprised by the number of people actively participating in this space and don’t understand that, trust me…
So, as you can imagine there are optimal places to place your capital and sub-optimal. High trading activity generating more LP fees, generating more yield.
On top of this, you would also want to be in a pool that has high liquidity so that those wanting to trade aren’t affected by high slippage, if this is the case they will trade elsewhere with high liquidity and the LP fees will go to the other pool.
That being said, you also don’t want the pool to be so saturated that when a trade occurs and an LP fee is distributed to those in the pool, you don’t generate too much from it as it has to be split evenly throughout everyone based on the size of their LP deposit.
So, as you can see it becomes tricky to actively monitor and find the sweet spot for yield generation if you are an active LP.
To add even more of a headache for yield farmers, we are 150% living in a multi-chain world. There are no two ways about it.
With the emergence of alternative chains in response to Ethereum’s retail-exclusionary gas fees, there are now more chains, more AMMs, more trading pairs and places to generate yield… if done correctly.
Because if it isn’t done correctly, your “capital efficiency” could well be highly…well…inefficient.
So, how do you ensure your funds are deployed in the best place? Being on the constant lookout across all chains/pools is extremely time-consuming and fees accrued for constant switching can and will add up.
Some of the greatest minds in this space have recognised this and begun to build a series of products that seek to maximise capital efficiency and allow their users the most optimal yields.
The project I am talking about is of course Popsicle Finance. So let’s take a look at how this yield-printing protocol is going to work.
Project Overview –
Popsicle Finance is another brainchild coming out of the Daniele Sesta camp. Need I say anymore? Article complete…
In all seriousness, what these guys are setting out to achieve with Popsicle, Abracadabra and Wonderland (article HERE) is nothing short of greatness for its users and supporters.
You can see this from the adoption and price action this week whilst Bitcoin is ripping and destroying all alts in its path, ICE, SPELL and TIME have all hit highs. Why is this? Well, people recognise what is brewing here with this team and don’t necessarily mind taking a hit on buying high to sell higher.
As I alluded to in the introduction, Popsicle is geared towards increasing capital efficiency for its users.
The above issues with being an LP are real and the opportunity cost for sub-optimal positions are too big to ignore.
The team are huge on the fundamental and founding ideas of DeFi, in that it is for everyone to be the makers of their own financial destiny without the need for a nanny-state dictating how you and others utilise their hard-earned capital.
On top of that, the team are big believers in the multi-chain world. From their project documents, they want to make it possible for anyone, anywhere to be able to gain exposure to great yield no matter which chain they reside on.
With the amount of capital that Popsicle Finance will bring into its platform the ability to connect the multi-chain world together will become a whole lot easier. Popsicle will enable excellent liquidity across all the chains you use, know and love.
So, with all that being said, how does Popsicle Finance aim to achieve this capital efficiency for its users?
How Does Popsicle Finance Work?
There are a few products in the Popsicle camp that allow users to benefit from maximum yield.
Let’s take a look at each one in detail…
Sorbetto –
Sticking with the Italian icy dessert theme, Sorbetto is where the users of Popsicle begin to benefit.
This is the aspect of the protocol that allows liquidity providers to maximise their trading fee rewards and incentive gains in order to achieve the best returns in the business.
Sorbetto is actually broken down into two flavours, so let’s take a look at how they both work.
Sorbetto Fragola –
Fragola is geared towards increasing capital efficiency on the most recent Uniswap v3 protocol.
For the uninitiated, Uniswap v3 was released earlier in May and expanded on their AMM product which revolutionised DeFi.
Uni v2 which was the original AMM that allows users to deposit their crypto in an LP, say ETH-USD LP and earn trading fees (0.3%) each time either of those tokens is traded against each other.
The protocol works by following a simple price equation curve of x * y = k and as such, allows users to earn trading fees on the full range of the price curve.
This has its pros and cons for liquidity providers as their assets are spread across the full range of the curve from 0 to infinity. Great for trading fees over time particularly in highly volatile markets but not very capital efficient.
Uniswap v3 introduced concentrated liquidity which allows users to supply their assets to earn fees in a price range. So, in effect, this concentrates liquidity at desired price ranges to allow maximum trading fees to be earned and ignores both extremities which doesn’t see much trading activity, which is more capital efficient.
So, as you might have already guessed by now, Sorbetto Fragola actively manages and optimises the pools and the range in which the LP trades in, based on historical volatility data.
This way LPs that supply their capital through the Sorbetto Liquidity Pool don’t have to worry about actively managing their position and can sit back and achieve the most optimal yields.
In practice, I would take my tokens which I wish to supply as liquidity and place them into the Sorbetto Fragola Liquidity Pool. Once I enter the pool I will receive a Popsicle Liquidity Provision (PLP) which is effectively a receipt of my entrance and a note of my contribution to the pool. From here I can use this PLP as with any other LP token to either stake it or use it for other incentives as the opportunities arise.
With Abracadabra and Wonderland also under the same roof, I can envisage a little crossover here, I am not sure how yet, but it isn’t out of the question…
Some of you may be asking, well Uni v3 is all well and good but that isn’t exactly great for the whole multi-chain thesis. Well, you are correct but with Uniswap deploying onto layer 2’s such as Arbitrum and Optimism and the inevitable zk-rollup of choice when the time comes, there will be plenty of yield-bearing opportunities to earn excellent yield using Fragola.
On top of that, the Uniswap v3 code is licensed for 2 years after that, from my understanding, the code is fair game… and if that doesn’t cut it for you, Popsicle also has Sorbetto Limone…
If you want to learn more about Uni v2 and v3, Finematics have the best video on YouTube explaining it below…
Sorbetto Limone –
This is a typical LP yield optimiser in the sense that Limone will actively seek out highly traded pools and hence generate greater fees as rewards. On top of that, pools with high incentive rewards i.e. farm tokens will also be utilised to increase the LPs gains through auto compounding.
Think of this as an actively managed whale allowing the average retail DeFi user to get a glimpse of how the big guys roll. By collectively coming together in the Limone pool, users will collectively earn rewards and receive an equal distribution of the rewards based on their LP contribution.
This infographic sums it up perfectly.
I just want to touch on impermanent loss (IL) for a second. IL is something to consider whenever you are providing liquidity. That being said, I kind of think it gets kind of a bad rep (bad rap?… who knows).
Of course, you are subject to the downside if either or both of your tokens dips in price, but it would have if you were just holding them right?
If you are looking at this from a purely yield generating standpoint, you shouldn’t be too concerned about IL particularly if you are providing liquidity for the mid to long term.
I know this may sound counterintuitive but you are also in control of when you choose to withdraw that liquidity hence the impermanence of it.
Anyway, I think folk should be a little less frightened of the big bad IL particularly those with a long term LP plan. If you are going to provide liquidity for a few days then it kind of doesn’t make sense, IMO, particularly for yield.
The beauty of Sorbetto is that if you are constantly hopping from farm to farm or even from chain to chain, you get the benefit of your painstaking musical chair endeavours, without having to lift a finger. Just my two cents (pence, I’m English).
Leveraged LP position? –
There is mention of the Gelateria in the Popsicle Finance docs too. Remember those PLPs from depositing into the Sorbetto Fragola pools? Gelateria from what I can gather would effectively allow these PLPs to be taken and used to borrow further assets or even more of the same LP using your PLP token as collateral.
In effect, this gives you a leveraged PLP position but as the collateral is the same as the asset borrowed the risk is vastly reduced. Folding this way will generate additional fees for the users. Leverage can be used wisely if you know what you are doing.
So to reiterate what this means… You will be able to leverage up your LP position with extremely low risk effectively generating more income from your LP deposit into Popsicle.
I can imagine there will be more information on this coming out in the coming weeks so consider this a warning…
The ICE Token –
So, how does the native ICE token come into all this? Well, with all the projects that come out of this team they are primarily focused on generating wealth and income for its users. Again, this is why I back them in everything they do.
So, with ICE users will be able to stake the token and in return receive nICE. With every single LP deposited into Sorbetto, both Fragola and Limone will be subject to a 10% performance fee. You can see where this is going…
The performance fee will then be redistributed to all those staking ICE, very tasty indeed.
So you can provide LPs to Sorbetto and be passively earning the best yield in the business without lifting a finger or you can be even lazier and buy ICE and then stake it.
Personally, I will be depositing LPs into Sorbetto and also staking ICE. Why? Well, I am effectively paying myself a performance fee for being lazy, in the form of redistributed ICE. Plus, why wouldn’t you?
Back in July, the team posted this proposal on their Medium… After revisiting the tokenomics of ICE they concluded that the protocol was self-sustaining and that the 53,635,733 (77%) of remaining ICE to be minted was kind of unnecessary.
They argued that Popsicle at the time was generating excellent returns for its users and also for the protocol, so why continue to increase the supply and inevitably decrease the demand and subsequent price for those who have supported the protocol from the early days?
Anyway, the vote passed (obviously) and the team burnt a total of 44,842,141 (69.37%) of the ICE supply which you can see below from the blackhole address on Etherscan. This at current ICE prices is around $0.58bn (as 3AC would say).
It is just the little things, well in this case, pretty damn big but you get what I mean. The team seems to have the best interest of their community in mind at all times which is pretty hard to come by in this industry. So, if you find a team like this, then it would be wise to back them, in my opinion.
As I touched on above nICE will be what you receive upon staking ICE.
I have just pinched this from the Popsicle docs, I was going to reword it but there is no need, so…
The process is pretty simple and straightforward:
- Users deposit ICE tokens into the nICE-Pool.
- As a receipt of their deposit, they receive nICE tokens in their wallets. nICE tokens represent the share of the nICE-Pool owned by the user.
- Fees are collected from the protocol, used to market buy ICE tokens that will later be deposited into the nICE-Pool.
- When users want to unstake, they receive their share of the nICE-Pool, which corresponds to the initially staked ICE tokens as well as any additional share of the fees.
Isvikingers Community –
As I have mentioned a few times above, as the project is coming out of the same camp as Wonderland and Abracadabra, the community has an awful lot of overlap and seems to have bought into the full stack of products available.
Personally, I have my bags packed with TIME, SPELL and ICE as I know the team and the community behind these projects are all die-hard supporters. The Isvikingers have a powerful presence on Twitter, Telegram and Discord and once a movement sets in like this, it is pretty difficult to stop. Especially when everyone is making a lot of great returns on the underlying products.
Previous Flash Loan Attack and Recovery
It wouldn’t be right to not mention why there is a relaunch so I’ll cover that now. There was a flash loan attack that saw Sorbetto pools drained of around $20m from LPs. The exploit in the code was not picked up by 2 audits that the team had carried out before the original launch.
The team built a recovery plan for all those affected by the dickhead who conducted the attack and Daniele Sesta used 1,000,000 of his own ICE allocation to compensate those unfortunate folk and at current prices, this equates to around $14m.
More info on the recovery and their current audit that has just been approved by QuantStamp can be found by clicking the links.
Prediction and Potential –
If I try to put my analytical hat on for a second and think about the total revenue that this project can generate, it begins to hurt my little head. I actually have a pretty fat head but in brain terms it is little…
Who else is creating an actively managed yield optimising monster? There are yield aggregators, sure, but are they fine-tuning for Uni v3 liquidity to maximise yields on top of returns? I can’t think of one…
There is Visor which I invested in previously but that was short-lived. If someone builds it will they be able to compete with marketing and the teams drive to deliver to their investors or will they be heavily VC backed with the interests of those behind the scenes?
Who knows but there doesn’t seem to be any viable competition for this project in my mind and with the first-mover advantage it will be near impossible to beat.
What would yields look like when Popsicle goes live?
It is a pretty difficult question to answer. Yields will be variable and APYs will fluctuate. That being said, if and when Sorbetto hits some huge TVLs they will inevitably become some of the largest LPs in some of the most popular and yield bearing pools in DeFi. An increased share of the trading pools, corresponding to higher trading fee rewards which are used to buy back ICE and redistribute to nICE holders. It sounds great to me.
It kind of hurts my head to think about the next part but I will try to explain it anyway. With the project cross over between wonderland, Abracadabra and Popsicle, it wouldn’t be ridiculous to suggest that trading pools from some of the most popular ecosystem tokens like ETH-MIM, AVAX-MIM, FTM-MIM etc could effectively be generating income from 1, 2 or even all of the ecosystems projects.
I’m just thinking out loud with this next part but in theory, if someone minted MIM on Abracadabra, bridged to Avalanche, paired it with AVAX in an AVAX-MIM LP which was then used to mint TIME on Wonderland at a discount, the treasury now holds the AVAX-MIM LP which could be deposited into Sorbetto on Popsicle to be actively managed… Would this be feasible? Who knows, but you can see how the overlaps can work and lift all aspects of these projects together.
Summary –
So, yeah there we have it. Popsicle Finance in a nutshell. The protocol should be gearing up for the relaunch in the coming weeks and you can see the anticipation reflected in the ICE token price which is soaring day after day. Are you still waiting for the dip, anon?
This anticipation may be ramped up even more once the team hit the ETH Lisbon event with their community meet up for all Frogs, Isvikingers and Wizards on the 21st of October.
If you haven’t guessed already, I am a mega-bull on Popsicle Finance and believe that the revenue generated for its users is going to be unparalleled for the amount of effort they have to put in.
I’ll be staking and providing liquidity to Sorbetto which will possibly be on Ethereum first from what I can gather.
I don’t think it would be wise to fade Popsicle. The right team, community and product are all equally important in crypto and this project has it all.
TLDR: Popsicle hasn’t even launched yet and people are aping hard. What happens next could be very interesting, to say the least. I think ICE holders and PLPs will be sitting very pretty in the coming months to years.
Finally, if your project needs “A Complete Guide” from a fellow degenerate ape, give me a shout on Telegram @blocmates or send me an inbox at info@blocmates.com or DM on Twitter @blocmatesdotcom – Full disclaimer I only work with projects I would/do invest in myself. No shills.
Resources –
- Popsicle Finance App – https://popsicle.finance/
- Twitter – https://twitter.com/PopsicleFinance
- Discord – https://discord.com/invite/popsicle
- Where to Buy ICE – https://www.traderjoexyz.com/#/home
